Mortgage delinquency, Microeconomics

The issue I like to discuss is the ‘US Mortgage Delinquency'. The Mortgage Delinquency may be defined in simple term as the ‘repeated failure to make loan repayment on time'. The data released by ‘Mortgage Bankers Association' showed that during the first quarter of this year, 10 percentages of borrowers were delinquent on their mortgage loans. This index shows that, homeowners with a mortgage had failed to repay the at least one of their payment from January to March. This seasonally adjusted index rose from 9.5% for the fourth quarter of 2009 to record high of 10% for first quarter of 2010, and it was only 9.1% during the same period of 2009. This issue is unwelcoming in the current situation as we expect this rate to decrease as a result of recent economic improvements. Conversely, the rate increases and this increase in the rate of Mortgage delinquency will drag the recent economic recovery. Also, the increasing number of homeowners at risk of default will have a long lasting effect on the economy of United States. This issue has lasted for almost four years from now, which was triggered in 2007 by risky home loans called adjusted rate mortgages where the payments are reset to higher rates, loss of work and income. Even though the economist expects that this rate will decline in the near future, the effect of this delinquency will have a lingering effect on the economy of our country. This project is targeted towards the online college students and English professor who have adequate knowledge on the current economic crisis. The targeted audiences have good knowledge on the current economic crisis and their causes. They are familiar with the terms such as sub-prime crisis, mortgage delinquency, adjusted rate mortgages etc. The interest of the audience towards this project will be more on identifying the key causes to the defaults of homeowners, consequences of this defaults on their future personal factors such as, the financial impacts, their capacity to borrow finance in future, health related issues both physiological and psychological issues, impact of their mobility and their relationship with neighbors etc., identifying policies relating to education, counseling, financials, regulations and reporting that reduces the negative impact on defaulted homeowners, and also on the broader sense the risk to US housing system and US economy. This issue is highly important to the target audience and also to most of the United States citizen as this will have considerable effect on most of their decisions in near future. The mortgage delinquency is a big factor behind sub-prime crisis which has a considerable effect on the economy of our country and also on various others factors associated with our economy.

The research on this issues starts with ‘literature review', where various articles related with the current issues both online articles and journal articles are identified and key concepts are studied. Once this is over, interviews with representatives of key players in the United States economy are arranged. These steps help in developing considerable knowledge on this issue and based on this information, the question that should be asked to the respondents are developed. Once the questionnaire is formulated, it is pilot tested before actual commencing of data collection. The targeted respondents are identified based on the requirements and the questionnaire is mailed to these respondents. The ideal respondents for this research are those homeowners who failed to repay their mortgage payment in the recent years. Also, face to face interview with some of the respondents are conducted. Based on the respond provided and using the various statistical tools the data collected are analyzed and reported. The research technique that will be employed here is the descriptive research of stratified sampling technique. The questions that will be used in the research includes some basic demographic questions, questions related to various debts obtained by the respondent, type of institution from where loan is obtained, process of applying for their loan, loan amount, reasons for not re-paying the loan etc.

I believe that the current increase in the mortgage delinquency is short term in nature and this will be offset by recent improvements in the economy. As stated by Manager of Weichert Realtor, Tim O'Shea, "the panic to buy is over. People are decompressing. It's like a hangover". The federal government will formulate new strategies to improve the economy in the long run. The main cause for mortgage delinquency is the sudden fall in income due to lost jobs, once this is addressed, the economy will stabilize itself in due course. To avoid unemployment, the federal government has already forced some restriction on outsourcing the products and services. I expect much more actions against outsourcing will be announced in near future. Also some reforms relating to the leverage restrictions i.e. restriction on cushion amount that should be maintained by each and every institution should be made by the government. The Obama's government has spent almost $75 billion to overcome the mortgage delinquency and I expect this action will continue in near future. The federal government has taken considerable steps to improve the economic condition by providing bailout to many big organizations. These organizations are highly interconnected with the economy and bankruptcy of these firms will result in systematic risk. The government should continue providing bailout to big firms that requires assistance from government to overcome the crisis.